Appearances in Audits Are Actually Everything

Appearances matter in conducting audits.

The Yellow Book says appearance is an important factor in conducting audits; that is, “independence in appearance,” which goes along with independence of mind. These are the two main qualities an auditor must exhibit in order to meet the Generally Accepted Government Auditing Standards (GAGAS) standard on independence.

The focus on these two qualities in the 2011 revision of the Yellow Book represents a slight change from the 2007 version. The 2011 Yellow Book defines these two important aspects of the personal conduct of an auditor as:

Independence of mind is a state of mind free of influences that compromise professional judgment

Independence of appearance is the absence of circumstances that would cause a reasonable third party to conclude that the objectivity or integrity of the auditor is compromised

To aid in the process evaluating these factors, the 2011 Yellow Book presents a new conceptual framework for making independence determinations. The framework includes a decision tree or yes-or-no series of questions and steps that guide an auditor or an audit organization in assessing independence. To view the framework, refer to page 215 of Appendix II in the Yellow Book.

While auditors could always make successful independence determinations using previous versions of the Yellow Book standards, these definitions and the new conceptual framework greatly enhance an auditor’s ability to make a sound determination for any audit.